| Date | Category |
|---|---|
| 28th February 2022 | Blog |
Here, ICT Category Manager, Mark Lewis, shares insights into how his commercial background is influencing his approach to tendering, framework and supplier management.
With over 20 years’ experience running procurement projects and programmes across the globe, I (unfortunately!) have plenty of experience of the obstacles we, as procurement professionals, face when delivering effective framework and supplier management. Prior to joining SUPC, I worked on large-scale technology procurement projects all over the world in categories including telecoms and communications, broadcast, space and computing. More recently, I worked in the utility sector managing third-party outsourcers located in the UK and South Africa. I’ve now been with SUPC for just over 12 months and have a better perspective on the workings of the HE sector – and importantly – some of the unique challenges we face.
Universal Challenges: How are Public and Private Sector Procurement the Same?
Whether it’s idiosyncratic local working practices, unusual costs, or demanding third-party partners or regulatory authorities; each environment I’ve worked in is ‘unique’. I say ‘unique’ because there is – reassuringly – some consistency in practices that support successful procurement, regardless of whether that’s in the private or public sector. There are, of course, key elements of good procurement that span the private and public sectors: good account management, CSR, driving competitive cost and rigorously assessing the supplier’s ability to deliver against the specification. Regardless of what sector we’re working in, procurement solutions need to be adaptable to the needs of the business. With the speed of change and digital development, frameworks and contracts need to be as flexible as possible. As new procurement projects surface, we need to be able to add new work packages and vary terms (within certain limits), so that institutions or departments maintain the right level of control.
Private Sector Practice to Support Better Public Procurement
Both the Green Paper and the National Procurement Policy referenced a move towards increased commercial practice within public sector procurement. While there are excellent examples of commercial procurement activity already taking place every day within Higher Education (HE), there are opportunities to integrate more private sector practices into HE procurement. For those who are interested in exploring this topic in-depth, you might like to join our newly established SUMS Commercial Community of Practice. For now, though, here are five private sector practices that can be used to support better public sector procurement. Some of my suggestions may already be in place in your institution, some may be in progress, and some may be goals for the future. Either way, my hope is that these provide the rigour and flexibility our sector needs to deliver value for money.
Top Tips from the Private Sector
Mandatory Questions
I’ve always been a fan of mandatory questions. We used to call them killer questions. We would evaluate these questions as a team, which would include members from the project team and Procurement Department. Typically, these mandatory questions would either flow down from the customer specification or we would recognise the need for certain skills, capabilities or competencies to meet the scope. To pass the killer question, all evaluators reviewing the bid had to agree that the bid response provided sufficient confidence to progress the submission (admittedly a lot easier with a team of 6). Failure to get all evaluators to agree meant instant rejection of that supplier. At SUPC, we are looking at ways to use mandatory questions to set minimum standards in key areas, such as responsible procurement. Suppliers would have to pass these killer questions to get onto the framework. For example, we are now using mandatory questions to benchmark suppliers’ approaches to meeting the requirements of the Modern Slavery Act (MSA). By including mandatory killer questions about the MSA and benchmarking responses, we will be able to better measure, record and report improvements in behaviour. Most importantly, we will be able to hold the suppliers accountable for their bid responses. This will allow us to work more closely with our supply chains and improve working practices. The answers to these killer questions also provide the data for us to undertake active oversight and to measure compliance.
How Could this Work for Universities?
Universities could explore their own priorities and implement similar killer questions that can be used in call-offs from frameworks (as long as they’re not duplicating questions already asked as part of the framework). They could also be used in your own procurement exercises.
Auditing Suppliers
A critical activity – especially in heavily regulated areas such as IT, telecoms and power – is the need to audit suppliers. In my previous roles, supplier auditing was a requirement across the supply chain. We would check to ensure that bid responses were accurate and that documentation, such as employee training certificates etc., were up to date and accessible. The negative impact of breaches in areas such as health and safety is not limited to brand image damage, loss of profits or the inability to successfully bid for new projects. Failure to live by the standards suppliers commit to in their bids can cost lives. Over a three-year period, one large-scale and market-leading supplier reported 33 deaths worldwide, including its own employees and contractors working for them. All these deaths were preventable but happened because – despite signing up to various codes of conduct – there were problems validating behaviour across their employees and supply chain. It should never be enough to accept what is written on a page as evidence of adherence to a policy. There has to be ongoing assessment, validation and, where necessary, a documented approach to improvement.
How Could this Work for Universities?
Auditing is a costly and time-consuming event for a single entity to undertake. SUPC’s approach is to work with organisations such as Electronics Watch. SUPC’s membership-level affiliation to Electronics Watch is an excellent start towards helping universities support this activity. Electronics watch carries out audits of production facilities in the IT sector to provide and improve ongoing protection of workers’ rights in the IT Supply chain
Bid Defence
A bid defence is:
“…an important step in the vendor selection process. It is an opportunity for both parties to validate assumptions in the proposal, address questions, review operational aspects at a high level, and discuss next steps.” (read more here)
Debjit Biswas, Vice President and Head of Development Operations, Phizer India (2016)
Not typical in the public sector, perhaps owing to the limitations implied by the Public Contract Regulations, bid defence meetings were a vital tool in my private sector procurement – especially on complex projects. They allowed us to robustly analyse the claims made in the bid and challenge the supplier for justifications. We would hold a detailed discussion with the supplier about their bid, challenging costs and assumptions they used and, where necessary, providing an opportunity to revise pricing.
It is important suppliers are given the opportunity to make a profit – provided that it is fair and proportionate. Good suppliers will use profits to reinvest in their business and look to improve their performance and products – ultimately, your institution will benefit.
How Could this Work for Universities?
Regular and open communication with suppliers is vital and while there are rules surrounding communication during a tender, this should never stop communication prior to the tender being issued. Premarket engagement and product demonstrations are valuable tools. If you are worried about what you can and can’t discuss, talk to us, we are here to help.
Gain Share
A gain share is simply a way of agreeing to share benefits – usually money. It can be linked to productivity, performance or, as in an example below, a series of cost-saving activities. I was once told by a supplier that a change in my processes could reduce my monthly cost by up to 50%. As part of the discussion, he was able to put a value around that saving – it was a claim that had been researched and considered and was a lot more than just bragging. There is nothing to stop you from adding supplier claims into the contract. To be fair, it was not a simple process to add the statement to the contract, but it can be done -proceed with caution on this one.
How Could this Work for Universities?
An example of this might be where a supplier to your university identifies an opportunity to improve an invoicing process but there is a cost around implementation. Instead of the university paying the implementation costs upfront, a gain share approach would be for the supplier to recover their costs from the initially delivered costs-savings. Once supplier costs had been recovered, additional savings could be shared between the university and supplier under an agreed split and for a set period of time.
Procurement staff would need to understand and agree:
- The starting point eg what is my current cost
- The method of recording costs saving
- The trigger points for payments under the gain share agreement
Formalising the End of the Relationship
One thing we are always very bad at is breakups. The division and returning of the property when the relationship is at an end can be painful – especially if there is a new partner involved. This applies equally to the end of a commercial relationship. When terminating an agreement and switching to a new supplier, it is not uncommon to suddenly be presented with an invoice for the costs incurred by the departing supplier (for ending the relationship). It may sound like a strange thing to do, but it is actually quite helpful to require the supplier to create an exit plan. An exit plan is not needed for a lot of agreements but is useful where you are sharing information, and documentation or where the general unpicking of the relationship is likely to be difficult.
How Could this Work for Universities?
SUPC frameworks contain a general provision that the departing supplier must provide support, but that may not cover specific areas such as costs incurred or any obligations regarding timescales, etc. A simple but effective way of dealing with this is to add a clause to the contract requiring the supplier to provide an exit plan within a certain timescale, with a requirement that the exit plan is updated on an annual basis. University procurement teams could ask the supplier to provide an exit plan plus a list of costs to be incurred – this could be required within three months of the start of the agreement.
And Finally…
One recommendation I always give is to read the Buyer’s Guide. There is a lot of information in there, especially around the call-off process, such as a direct award, desktop calculator and further competitions. The team at SUPC are here to assist so, please don’t hesitate to contact us. If we don’t know the answer, we usually know someone who does; we know our frameworks and we know how to help you get the best commercial and social value by using them. If you have any questions, please contact me at m.r.lewis@reading.ac.uk.